The Financial Crisis: This Day—One Year Ago, Sept. 13, 2008

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Friday, 11 Sep 2009 | 5:32 PM ETCNBC.com

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Double trouble on Wall Street.

Saturday begins with meteorology briefly overshadowing financial news: Hurricane Ike tears two oil rigs loose from their moorings in the Gulf of Mexico. Some drillers and refiners evacuate their workers.

But the weather quickly takes a backseat to the the banking storm. Charlie Gasparino reports that Bank of America has pulled out of negotiations to buy Lehman Brothers — and is instead focusing on Merrill Lynch.

This Day 1 Year Ago - A CNBC Special Report - See Complete Coverage

Sources tell CNBC that Federal Reserve officials are pressuring BofA to do a Merrill deal.

Merrill faces a possible crisis of psychology, Gasparino says: short-sellers regard the brokerage as the next weakest investment bank after Lehman and the fallen Bear Stearns, which was sold at low-ball price in March.

"People are saying, 'Who's next on the list?"' says Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor in Cincinnati.

Short and non-short players alike have been watching Merrill Lynch shares lose about a third of their value this week — while peers Citigroup and Morgan Stanley shed just 2 percent and 4 percent, respectively. The decline is all the more remarkable because Merrill has a more diverse portfolio than Lehman, boats the largest brokerage sales force of any Wall Street firm and owns a piece of money manager BlackRock .

By late Saturday night, CNBC learns that a deal has been drafted to acquire Lehman Brothers' bad assets and ostensibly pave the way for an eventual sale of the firm.

The Crisis: 1 Year Later - A CNBC Special Report - See Complete Coverage

Charlie Gasparino reports that under the terms of the deal — which is far from certain — "all the major Wall Street firms" would contribute $30 billion to purchase Lehman's bad real estate assets and create a so-called "bad bank."

The proposal is being drafted Saturday night and will be discussed Sunday morning, according to sources. If the firms involved agree on the terms, which would amount to some $3 billion per firm, it will create conditions necessary for the sale of Lehman to one of several suitors, including Bank of America, Barclays and HSBC.